January 24, 2013 / 2:11 PM / in 5 years

EU carbon market plunge is "wake-up call": commissioner

BRUSSELS (Reuters) - A carbon market price fall to less than 3 euros on Thursday must serve as a wake-up call to EU member states to back a Commission plan to prop up the European Union’s Emissions Trading Scheme (ETS), the EU climate commissioner said.

The cost of carbon allowances on the ETS hit a low of 2.81 euros a metric ton (1.1023 tons) on Thursday after a European Parliament committee in a preliminary, non-binding vote, rejected proposals for market reform.

The price later climbed back above 4 euros.

“It must be clear to all that when the Commission warned that the ETS price could drop dramatically it was not a false warning but a real possibility,” Climate Commissioner Connie Hedegaard said in a statement.

“This should be the final wake-up call both to governments and to the European Parliament.”

Thursday’s vote was only an advisory step in the tortuous EU process of trying to agree a plan to remove temporarily some of the surplus allowances that have depressed the market.

A more decisive vote in the European Parliament’s environment committee is expected next month, to be followed by a vote of member states.

Hedegaard said there was widespread agreement an ETS was “the most cost-efficient tool in EU climate politics” and world-wide the idea was catching on.

The European Union is working on linking up with other schemes in Switzerland and Australia, for instance.

As the rest of the world moves towards coherent carbon pricing, which many in business say they need to plan investment, Hedegaard said the European Union was in danger of a messy patchwork of policies, different for each of the 27 member states.

“The alternative to a well-functioning carbon market is hardly that the EU member states will make it cost nothing to pollute,” she said.

“The alternative is a re-nationalization of climate tools, meaning a future patchwork of up to 27 different systems and taxes, instead of one market creating a level playing field internally in Europe.”

Reporting by Barbara Lewis; editing by Rex Merrifield

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